§ 1
Keeping the approval in good standing
The Annual Activity Certificate is the liaison office's main FEMA filing. It confirms the activities carried out and that expenses were met only from inward remittances. Gaps such as funds received locally, or activities that look commercial, show up there first.
Before the validity period ends, the foreign company must apply through the AD bank for an extension, with the AACs for the period. If the company now wants to earn income in India, the right step is a subsidiary or branch, followed by closure of the liaison office.
§ 2
The law that applies
| FEMA Regulations, 2016 and RBI Master Direction | AAC, validity, extension and closure of liaison offices. |
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§ 3
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
The approval has expired without an extension.
Our approach
We approach the AD bank with the history and AACs, apply for extension or closure, and assess whether compounding is needed for the lapse.
Issue 2
Closing the office is delayed by unresolved tax or payroll items.
Our approach
We prepare a closure checklist covering final accounts, tax and TDS clearance, employee settlements and bank account closure, and file the closure application once each item is done.
§ 4
Process and timeline
- 1
Annual
AnnuallyAAC with audited accounts.
Filing: AAC by 30 September
- 2
Extension
6 months before expiryApplication before validity ends.
- 3
Closure
On exitFinal accounts, clearances and closure application.
§ 5
Our scope of work
Included
- Annual Activity Certificate
- Extension applications
- Conversion planning
- Closure
§ 6
Questions
Can a liaison office's validity be extended?
Yes, through the AD bank before expiry, supported by the Annual Activity Certificates for the period.
What happens to the liaison office's assets on closure?
Remaining funds are repatriated after liabilities are met; assets may be sold or transferred, subject to FEMA and tax rules.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.